<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
IRIDEX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
IRIDEX CORPORATION
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1998
--------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IRIDEX
Corporation, a Delaware corporation ("the Company") will be held on June 8, 1998
at 2:00 p.m., Pacific daylight savings time, at the Company's principal office
located at 1212 Terra Bella Avenue, Mountain View, California for the following
purposes:
1. To elect seven (7) directors to serve for the ensuing year or
until their successors are elected and qualified (Proposal 1);
2. To approve the adoption of the Company's 1998 Stock Plan and the
reservation of 250,000 shares of Common Stock for issuance
thereunder (Proposal 2);
3. To approve the amendment of the Company's 1995 Employee Stock
Purchase Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 75,000 shares from 100,000 to
175,000 shares (Proposal 3);
4. To approve the amendment of the Company's 1995 Director's Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder by 60,000 shares from 100,000 to 160,000
shares (Proposal 4);
5. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending
December 31, 1998 (Proposal 5); and
6. To transact such other business as may properly be brought before
the meeting and any adjournment(s) thereof.
Stockholders of record at the close of business on April 15, 1998 shall
be entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting. However,
to assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
Sincerely,
Mountain View, California Theodore A. Boutacoff
April 30, 1998 President and Chief Executive Officer
<PAGE> 3
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
IRIDEX CORPORATION
1212 TERRA BELLA AVENUE
MOUNTAIN VIEW, CA 94043
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PROXY STATEMENT
--------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
IRIDEX Corporation (the "Company") for use at the Annual Meeting of Stockholders
to be held at the principal offices of the Company located at 1212 Terra Bella
Avenue, Mountain View, California 94043 on June 8, 1998 at 2:00 p.m., Pacific
daylight savings time, and at any adjournment(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
The Company's telephone number is (650) 940-4700. These proxy solicitation
materials were mailed on or about May 6, 1998 to all stockholders entitled to
vote at the meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on April 15, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting and at any
adjournment(s) thereof. At the Record Date, April 15, 1998, 6,467,287 shares of
the Company's Common Stock, $.01 par value, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company at its
principal offices to the attention of Robert Kamenski a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
meeting and voting in person.
VOTING AND SOLICITATION
The cost of this solicitation will be borne by the Company. The Company
has retained the services of Skinner & Co., Inc. (the "Agent"), to perform a
search of brokers, bank nominees and other institutional owners. The Company
estimates that it will pay the Agent a fee of $3,500 for its services and
out-of-pocket expenses. In addition, the Company may reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone or telegram.
<PAGE> 4
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's Bylaws provide that stockholders holding a majority of the
outstanding shares of the corporation entitled to vote on the Record Date and
represented by person or by proxy shall constitute a quorum at meetings of
stockholders. Shares that are voted "FOR," "AGAINST" or "WITHHELD" on a matter
are treated as being present at the meeting for purposes of establishing a
quorum and are also treated as "entitled to vote on the subject matter" (the
"Votes Cast") at the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, with the exception of the proposal for
the election of directors, abstentions will have the same effect as a vote
against the proposal. Because directors are elected by a plurality vote,
abstentions in the election of directors have no impact once a quorum exists.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that while broker non-votes may be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore not be considered "Votes Cast" and,
accordingly, will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented at the 1999 Annual Meeting of Stockholders must be received by the
Company no later than January 6, 1999 and must otherwise be in compliance with
applicable laws and regulations in order to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten-percent stockholders are also required
by SEC rules to furnish the Company with copies of all forms that they file
pursuant to Section 16(a). Based solely on its review of the copies of such
forms received by it or written representations from certain reporting persons
that no filings were required for such persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
ten-percent stockholders were complied with except for a Form 5 for Mr. Nehra
which was filed late.
STOCKHOLDER INFORMATION
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, including financial statements and schedules is enclosed with
these proxy solicitation materials. In compliance with Rule 14a-3 promulgated
under the Securities Exchange Act of 1934, the Company hereby undertakes to
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<PAGE> 5
provide without charge to each person upon written request, a copy of the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
including the financial statements and financial schedules thereto. Requests for
such copies should be directed to IRIDEX Corporation, 1212 Terra Bella Avenue,
Mountain View, California, 94043, Attention: Investor Relations.
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<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of seven (7) directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the seven nominees named below, all of whom are presently
directors of the Company. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if elected. Should
any nominee become unable or decline to serve as a director or should additional
persons be nominated at the meeting, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
nominees listed below as possible (or, if new nominees have been designated by
the Board of Directors, in such a manner as to elect such nominees) and the
specific nominees to be voted for will be determined by the proxy holders. The
Company is not aware of any reason that any nominee will be unable or will
decline to serve as a director. Each director elected at this Annual Meeting
will serve until the next Annual Meeting of Stockholders or until such
director's successor has been elected and qualified. There are no arrangements
or understandings between any director or executive officer and any other person
pursuant to which he is or was to be selected as a director or officer of the
Company.
The names of the nominees and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
DIRECTOR
Name of Nominee AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------ ------ ---------------------------------------- -------------
<S> <C> <C> <C>
Theodore A. Boutacoff............... 50 President, Chief Executive Officer and 1989
Director of the Company
James L. Donovan.................... 60 Vice President, Corporate Business 1989
Development and Director of the Company
John M. Nehra (1)................... 49 Director of the Company and General 1989
Partner, New Enterprise Associates
William Boeger, III (1)(2).......... 48 Director of the Company and President, 1989
Chief Executive Officer and Chairman of
Calypte Biomedical Corporation
Milton Chang, Ph.D. (2)............. 53 Director of the Company and 1989
Chairman and Chief Financial Officer of
New Focus, Inc.
Donald L. Hammond, D.Sc. (2)........ 69 Director of the Company 1990
Joshua Makower, M.D. . . . . . . . . 34 Director of the Company and Chief 1997
Executive Officer, TransVascular, Inc.
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
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<PAGE> 7
In addition to serving as director, Mr. Donovan served as Chief
Financial Officer of the Company from February 1989 to October 1997, except
during the period June to November 1996.
Mr. Boeger has also served as Managing General Partner of Quest Ventures
since 1985.
Dr. Makower has served as Chief Executive Officer of ExploraMed, Inc.
since September 1995 and has served as Chief Executive Officer of TransVascular,
Inc. since March 1996. From September 1989 to September 1995, Mr. Makower was
Manager of Business and Technology Development at Pfizer, Inc.
VOTE REQUIRED
Directors will be elected by a plurality vote of the shares of the
Company's Common Stock present or represented and entitled to vote on this
matter at the meeting. Accordingly, the seven candidates receiving the highest
number of affirmative votes of shares represented and voting on this proposal at
the meeting will be elected directors of the Company. Votes withheld from a
nominee and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but because directors are elected by a plurality
vote, will have no impact once a quorum is present. See "Information Concerning
Solicitation and Voting --Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES LISTED ABOVE
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings and
took a total of three actions by written consent during the fiscal year ended
December 31, 1997. With the exception of Joshua Makower, who was elected a
director effective August 22, 1997, no director serving during the fiscal year
attended fewer than 75% of the aggregate of all meetings of the Board of
Directors and the committees of the Board upon which such director served. The
Board of Directors has two committees, the Audit Committee and the Compensation
Committee.
The Audit Committee of the Board of Directors, which consists of Messrs.
Boeger and Nehra, held two meetings during the last fiscal year. The Audit
Committee reviews and advises the Board of Directors regarding the Company's
accounting matters and is responsible for reviewing and recommending the annual
appointment of the independent public accountants, reviewing the services to be
performed by them, and reviewing and evaluating the accounting principles being
applied to the Company's financial reports.
The Compensation Committee of the Board of Directors, which consists of
Messrs. Boeger, Chang and Hammond, held one meeting during the last fiscal year.
The Compensation Committee reviews and advises the Board of Directors regarding
all forms of compensation to be provided to the officers, employees, directors
and consultants of the Company.
The Board of Directors has no nominating committee or any committee
performing such functions.
DIRECTOR COMPENSATION
Directors are not paid any cash compensation from the Company for their
services as members of the Board or any committee thereof, although they are
reimbursed for reasonable out-of-pocket expenses incurred by them in attending
such meetings.
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The Company's 1995 Director Option Plan (the "Director Plan") was
adopted by the Board in October 1995 and approved by the stockholders in January
1996. A total of 100,000 shares of Common Stock are reserved for issuance
thereunder. The Director Plan provides for the automatic and nondiscretionary
grant of nonstatutory stock options to purchase 11,250 shares of the Company's
Common Stock to each nonemployee director on the later of the effective date of
the Director Plan or the date on which such person becomes a director.
Thereafter, each non-employee director is automatically granted an option to
purchase 3,750 shares of Common Stock on July 1 of each year, if on such date he
or she has served on the Board for at least six months. The Director Plan
provides that the exercise price shall be equal to the fair market value of the
Company's Common Stock as of the date of grant.
Messrs. Boeger, Chang, Nehra and Hammond were granted initial options to
purchase 11,250 shares of Common Stock at an exercise price of $2.00 per share
on the effective date of the Director Plan. Such directors were granted
subsequent options to purchase 3,750 shares of Common Stock at an exercise price
of $14.875 per share on July 1, 1996 and subsequent options to purchase shares
of Common Stock at an exercise price of $9.125 on July 1, 1997. Mr. Makower was
granted an initial option to purchase 11,250 shares of Common Stock at an
exercise price of $8.75 on August 22, 1997, the date he was elected a director
by the Board. Subject to stockholder approval of the increase in the number of
shares reserved under the Director Plan, on July 1, 1998, Messrs. Boeger, Chang,
Nehra, Hammond and Makower will each automatically be granted options to
purchase 3,750 shares of Common Stock at an exercise price equal to the fair
market value on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Boeger, Chang and
Hammond. Mr. Boutacoff also participates in discussions regarding salaries and
incentive compensation for all employees (including officers) and consultants to
the Company, except that Mr. Boutacoff is excluded from discussions regarding
his own salary and incentive compensation.
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<PAGE> 9
PROPOSAL TWO
ADOPTION OF THE 1998 STOCK PLAN
INTRODUCTION
The 1998 Stock Plan (the "1998 Plan") was adopted by the Board of
Directors in February 1998, subject to stockholder approval. The 1998 Plan
provides for the grant of options and stock purchase rights to purchase shares
of the Company's Common Stock to employees and consultants of the Company. A
total of 250,000 shares of Common Stock are reserved for issuance under the 1998
Plan.
As of the Record Date, the Company's Amended and Restated 1989 Incentive
Stock Plan (the "1989 Plan"), which expires in August 1999, had approximately
56,950 shares available for future grant. In light of the approaching
termination date of the 1989 Plan, the Board believes it is in the best interest
of the Company to adopt the 1998 Stock Plan rather than increase the number of
shares reserved under the 1989 Plan. The Board believes that an option plan is
necessary to enable the Company to compete successfully with other companies to
attract and retain valuable employees, and the 1998 Plan will fulfill this
purpose. The Board also believes that it is appropriate to have a substantial
pool of options available for grant in connection with acquisitions that the
Company may make from time to time. The ability to make such grants enhances the
Company's ability to structure attractive offers to potential acquisition
targets. However, no such acquisitions are presently being considered by the
Company.
SUMMARY OF THE 1998 PLAN
The full text of the 1998 Plan is set forth as Exhibit "A" to this Proxy
Statement. The following summary of the 1998 Plan is qualified by reference to
that text.
General. The Plan provides for the grant of options to purchase shares
of the Company's Common Stock to employees (including officers and employee
directors) ("Employees") and consultants. Options granted under the Plan may
either be "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986 (the "Code"), or nonstatutory stock options, as determined
by the Administrator at the time of grant. The administrator of the Plan also
has the discretion to grant stock purchase rights to Employees and consultants.
Purpose. The purposes of the Plan are to attract and retain the best
available personnel and to provide incentive to key employees and consultants to
promote the success of the Company's business.
Administration. The Plan is administered by the Board of Directors or
one or more committees designated by the Board, as may be necessary to comply
with the applicable rules, including rules governing plans intended to qualify
plans under Rule 16b-3 or to qualify options as "performance-based compensation"
under Section 162(m) of the Internal Revenue Code of 1986 (the "Code) (the
"Administrator"). The Administrator has complete authority to construe,
interpret, and administer the provisions of the Plan and the provisions of the
agreements governing awards granted thereunder. The Administrator will have the
authority to prescribe, amend and rescind rules and regulations pertaining to
the Plan and to make all other determinations necessary or deemed advisable in
the administration of the Plan. The determinations and interpretations made by
the Administrator are final and binding.
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<PAGE> 10
Grant Limitation. The Plan provides that no optionee may be granted
options and stock purchase rights to purchase more than 150,000 shares of Common
Stock in any fiscal year, except that in connection with an optionee's initial
service, an optionee may be granted options to purchase an additional 100,000
shares, a total limitation of 250,000 shares.
Eligibility. Nonstatutory options may be granted to Employees and
consultants of the Company and its subsidiaries or successor corporation.
Incentive stock options may be granted only to Employees of the Company and its
subsidiaries. The Administrator selects the employees and consultants who will
be granted options and determines the number of shares to be subject to each
option. In making such determination, the Administrator takes into account the
duties and responsibilities of the employee or consultant, the value of the
services of such employee or consultant, his or her present and potential
contributions to the success of the Company, the anticipated years of future
service of an employee and other relevant factors. As of December 31, 1997,
approximately 74 employees and consultants were eligible to receive options
under the Option Plan. The Administrator shall determine which eligible persons
shall be granted options and stock purchase rights.
Exercise of Options and Stock Purchase Rights. Options and stock
purchase rights become exercisable at such times as are determined by the
Administrator and set forth in the individual agreements. Generally, options
vest as to one forty-eighth (1/48) of the shares for each full month of service;
however, typically the options will not be exercisable until at least twelve
months of service has been completed. In the case of stock purchase rights, the
Company has a repurchase option exercisable upon the termination of the
purchaser's employment, unless the Administrator determines otherwise at the
time of grant. The Company's repurchase option lapses at a rate determined by
the Administrator. The purchase price for the shares so repurchased is the
original price paid by the purchaser.
An option or stock purchase right is exercised by giving written notice
to the Company specifying the number of full shares of Common Stock to be
purchased and tendering payment of the purchase price to the Company. The form
of consideration for exercising an option or stock purchase right, including the
method of payment, is determined by the Administrator.
Exercise Price. The exercise price of options and stock purchase rights
granted under the Plan is determined by the Administrator and must not be less
than 100% of the fair market value of the Company's Common Stock at the time of
grant; provided, however, that incentive stock options or stock purchase rights
granted to stockholders owning more than 10% of the voting stock of the Company,
if any, are subject to the additional restriction that the exercise price per
share of each option must be at least 110% of the fair market value per share on
the date of grant. The exercise price of nonstatutory options is determined by
the Administrator and, in order to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code, must not be less than 100% of
the fair market value of the Common Stock on the date of grant.
Termination. The Plan gives the Administrator authority to vary the
terms of the individual option agreements. However, generally, if the optionee
ceases to be an employee or consultant, the optionee shall have the right to
exercise the vested portion of an unexercised option within thirty (30) days
after the date of termination, unless otherwise specified in the option
agreement. If such termination is due to death or disability within the meaning
of Section 422(c) of the Code, the optionee (or the optionee's legal
representative) shall have the right to exercise the vested portion of an
unexercised option at any time within twelve (12) months of the termination
date, unless otherwise specified in the option agreement. In no event shall an
option be exercisable beyond its term.
Term of Options. Options granted under the Plan expire as determined by
the Administrator, but in no event later than ten (10) years after the date of
grant. However, incentive stock options granted to stockholders owning more then
10% of the Company's outstanding voting stock may not have a term of more
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than five years. Stock purchase rights granted under the Plan also expire as
determined by the Administrator, but in no event later than ninety (90) days
after the date of grant. No option or stock purchase right may be exercised by
any person after its expiration.
Non-Transferability of Options. Unless determined otherwise by the
Administrator, options and stock purchase rights are non-transferable by the
optionee other than by will or the laws of descent and distribution, and stock
purchase rights are exercisable during the lifetime of the optionee or grantee
of the stock purchase right only by such optionee or grantee, or in the event of
the optionee's or grantee's death, by a person who acquires the right by bequest
or inheritance or by reason of the death of the optionee or grantee.
Adjustments Upon Change in Capitalization. The number of shares covered
by each outstanding option, and the exercise price thereof, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares resulting from a change in the Company's capitalization, such as a stock
dividend, stock split, reverse stock split, combination, reclassification, or
like change in the capital structure of the Company.
Transfer of Control. In the event the Company is a participant in any
merger or consolidation, each outstanding, unexercised option or stock purchase
right shall be assumed or substituted by the surviving corporation. If such
options or stock purchase rights are not assumed, they become fully exercisable
or the repurchase right applicable to them fully lapses, respectively, for a
period of fifteen (15) days following the Administrator's notice that such
option has become fully exercisable or that the repurchase option with respect
to a stock purchase right has fully lapsed, respectively. Any options which are
neither assumed nor exercised within 15 days of written notice from the Company
terminate upon the expiration of such period.
Dissolution or Liquidation. In the event of a dissolution or liquidation
of the Company, any outstanding option or stock purchase right shall terminate.
However, the Administrator may provide that any option be fully exercisable
until ten (10) days prior to such event. In addition, the Administrator may
provide that the Company's repurchase option with respect to any stock purchase
right shall fully lapse prior to such event.
Amendment or Termination of the Plan. The Administrator may at any time
amend, alter, suspend or terminate the Plan; provided that no amendment,
alteration, suspension or termination may impair the rights of any optionee,
unless mutually agreed otherwise. Options may be granted under the Plan during
the period expiring February 2008.
UNITED STATES TAX INFORMATION
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after the date of
grant and one year after exercising the option, any gain or loss will be treated
as long-term capital gain or loss. If these holding periods are not satisfied,
the optionee will recognize ordinary income at the time of sale or exchange
equal to the difference between the exercise price and the lower of (i) the fair
market value of the shares on the date of the option exercise or (ii) the sale
price of the shares. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director or
10% stockholder of the Company. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain or
loss recognized on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
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All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time a nonstatutory option is granted. However, upon its exercise,
the optionee will recognize taxable income generally measured as the excess of
the then fair market value of the shares exercised over the exercise price. A
different rule may apply if the optionee is a director, officer or 10%
stockholder. Any taxable income recognized in connection with an option exercise
by an optionee who is also an employee of the Company will be subject to tax
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. Upon resale of such shares by the optionee, any difference
between the sales price and the optionee's exercise price, to the extent not
recognized as taxable income as described above, will be treated as long-term or
short-term capital gain or loss, depending on the holding period. The Company
will be entitled to a tax deduction in the same amount as the ordinary income
recognized by the optionee with respect to shares acquired upon exercise of a
nonstatutory option.
THE FOREGOING SUMMARY OF THE EFFECT OF THE UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE OPTIONEE AND THE COMPANY IN CONNECTION WITH THE PLAN DOES
NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE APPLICABLE
PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY
IN WHICH THE PARTICIPANT MAY RESIDE.
AMENDED AND NEW PLAN BENEFITS
The Company cannot now determine the number of shares to be issued in
the future pursuant to the Plan to the named executive officers ("Executive
Officers"), all current Executive Officers as a group or all employees
(including current officers who are not Executive Officers) as a group. The
Company also cannot determine the number of shares that would have been received
by or allocated to the Executive Officers if the Plan had been in effect during
1997. In 1997, 407,775 shares of the Company's Common Stock were issued to all
employees pursuant to the 1989 Plan and 135,000 shares of the Company's Common
Stock were issued to the Executive Officers as a group.
REQUIRED VOTE
The approval of the 1998 Plan requires the affirmative vote of a
majority of the shares of the Company's Common Stock present or represented and
entitled to vote on this subject matter at the meeting. An abstention is not an
affirmative vote, and therefore, will have the same effect as a vote against the
proposal. A broker non-vote will not be treated as entitled to vote on this
subject matter at the meeting. See "Information Concerning Solicitation and
Voting -- Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF THE 1998 STOCK PLAN
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<PAGE> 13
PROPOSAL THREE
AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors in November 1995 and was approved by the
stockholders in January 1996. A total of 50,000 shares of Common Stock were
reserved for issuance under the Purchase Plan. In January 1997, the Board of
Directors amended the Purchase Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 50,000 to an aggregate of 100,000
shares. The amendment to increase the number of shares reserved under the
Purchase Plan from 50,000 to 100,000 shares was approved by the stockholders at
the 1997 Annual Meeting of Stockholders in April 1997. In February 1998, the
Board of Directors amended the Purchase Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 75,000 shares to an aggregate
of 175,000 shares. As of the Record Date, 30,756 shares were available for
purchase under the Purchase Plan.
The material features of the Purchase Plan are outlined below.
SUMMARY OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company with an opportunity to purchase Common Stock through accumulated payroll
deductions.
Administration. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, is administered by the Board of Directors or a
committee designated by the Board, as may be necessary to comply with the rules
governing plans intended to qualify as discretionary grant plans under Rule
16b-3 (the "Administrator"). All questions of interpretation or application of
the Purchase Plan are determined by the Administrator, and its decisions are
final, conclusive and binding upon all participants.
Eligibility and Participation; Withdrawal. Employees of the Company and
its designated subsidiaries who are employed on a given enrollment date are
eligible to participate in the Purchase Plan if they are customarily employed
for at least 20 hours per week and more than five months per year, and do not
own or hold options to purchase as a result of such participation, five percent
or more of the total combined voting power or value of all classes of stock of
the Company. Notwithstanding the foregoing, no employee may be granted the right
to purchase more than $25,000 worth or more than 1,000 shares of Common Stock
annually. Eligible employees become participants in the Purchase Plan by
completing a subscription agreement authorizing payroll deductions of up to 10%
of the employee's compensation, and filing it with the Company's Personnel
Department not later than the day before an enrollment date. An employee may
withdraw from the Purchase Plan at any time by giving written notice to the
Company. In such a case, all payroll deductions credited to the employee's
account and not yet used to purchase stock are refunded. Approximately 50
employees are currently participating in the Purchase Plan.
Offering Periods. The Purchase Plan is implemented by consecutive
six-month offering periods. Offering periods commence on the first trading day
on or after September 1 and March 1 and terminate on the last trading day of the
sixth month following such commencement date. The Administrator may change the
commencement date and duration of the offering periods without stockholder
approval.
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<PAGE> 14
Purchase Price. The purchase price per share at which shares may be sold
to employees under the Purchase Plan is 85% of the lower of the fair market
value of the Company's Common Stock (a) on the date of commencement of the
offering period or (b) on the last trading day of the six-month offering period.
The fair market value of the Company's Common Stock on a given date is the
closing sale price on the Nasdaq National Market. In the event the Company's
Common Stock is quoted on the Nasdaq system but not on the National Market
thereof, the fair market value is the mean of the closing bid and asked prices
for the Company's Common Stock on the date of determination. In the absence of
an established market for the Common Stock, the fair market value is established
by the Board of Directors.
Adjustments on Changes in Capitalization. In the event any change is
made in the Company's capitalization, such as a stock split or stock dividend,
which results in an increase or decrease in the number of outstanding shares of
the Company's Common Stock without receipt of consideration by the Company, the
number of shares remaining subject to the Purchase Plan and the purchase price
per share shall be appropriately adjusted. In the event of a proposed
dissolution or liquidation of the Company, the offering periods will terminate
immediately prior to such dissolution or liquidation, unless the Board provides
otherwise. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Purchase Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten the offering period then in progress by setting a new exercise date.
Transferability. No rights or accumulated payroll deductions of a
participant may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will or the laws of descent and distribution).
Amendment and Termination of the Purchase Plan. The Board of Directors
may at any time and for any reason amend or terminate the Purchase Plan, except
that (i) such termination shall not affect any purchase rights previously
granted (except as permitted under the terms of the Purchase Plan), and (ii) no
amendment may adversely affect a purchase right previously granted under the
Purchase Plan (except to the extent permitted by the terms of the Purchase Plan
or as may be necessary to qualify the Purchase Plan as an employee stock
purchase plan pursuant to Section 423 of the Code or to obtain qualification or
registration of the shares under applicable foreign, federal or state securities
laws). The Purchase Plan shall continue in effect for a term of ten years unless
terminated earlier by the Board or until all of the shares reserved for issuance
thereunder have been issued.
UNITED STATES TAX INFORMATION
The Purchase Plan and the rights of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon the sale or other disposition of the shares, the participant
will generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the offering period and one year from the date the
shares are purchased, the participant will recognize ordinary income measured as
the lesser of (i) the excess of the fair market value of the shares on the date
of such sale or disposition over the purchase price, or (ii) an amount equal to
15% of the fair market value of the shares as of the first day of the offering
period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The
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<PAGE> 15
Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income recognized
by participants upon a sale or disposition of shares prior to the expiration of
the holding periods described above.
THE FOREGOING SUMMARY OF THE EFFECT OF THE UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE PARTICIPANT AND THE COMPANY IN CONNECTION WITH THE
PURCHASE PLAN DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO
THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT
DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
AMENDED AND NEW PLAN BENEFITS
The Company cannot now determine the number of shares to be issued in
the future pursuant to the Purchase Plan to the named executive officers
("Executive Officers"), all current Executive Officers as a group or all
employees (including current officers who are not Executive Officers) as a
group. In 1997, 38,966 shares of the Company's Common Stock were issued to all
employees (including current officers who are not Executive Officers) and 4,538
shares of the Company's Common Stock were issued to the Executive Officers as a
group. As of the Record Date, 30,756 shares remained available for issuance.
REQUIRED VOTE
The approval of the amendment of the Purchase Plan requires the
affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote on this subject matter at the
meeting. An abstention is not an affirmative vote and will therefore have the
same effect as a vote against the proposal. A broker non-vote will not be
treated as entitled to vote on this subject matter at the meeting. See
"Information Concerning Solicitation and Voting -- Quorum; Abstentions; Broker
Non-Votes."
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
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<PAGE> 16
PROPOSAL FOUR
AMENDMENT OF THE 1995 DIRECTOR OPTION PLAN
INTRODUCTION
The Company's 1995 Director Option Plan (the "Director Plan") was
adopted by the Board of Directors in October 1995 and was approved by the
stockholders in January 1996. A total of 100,000 shares of Common Stock are
reserved for issuance thereunder. The Director Plan provides for the automatic
and nondiscretionary grant of nonstatutory stock options to purchase 11,250
shares of the Company's Common Stock to each nonemployee director (an "Outside
Director") on the later of the effective date of the Director Plan or the date
on which such person becomes a director. Thereafter, each Outside Director will
be automatically granted an option to purchase 3,750 shares of Common Stock on
July 1 of each year, if on such date he or she has served on the Board for at
least six months. The Director Plan provides that the exercise price shall be
equal to the fair market value of the Company's Common Stock as of the date of
grant.
In February 1998, the Board of Directors authorized an amendment to the
Director Plan, subject to stockholder approval, to increase the number of shares
of Common Stock reserved for issuance thereunder by 60,000 shares to an
aggregate of 160,000 shares. The Board of Directors believes that the proposed
amendment is necessary to allow the Company to continue to attract and retain
the best available people for service as directors and to compensate them for
their many hours of service. As of the Record Date, 10,000 shares of Common
Stock were reserved for issuance under the Director Plan.
The material features of the Plan are outlined below.
SUMMARY OF THE 1995 DIRECTOR OPTION PLAN
Purpose. The purposes of the Director Plan are to (i) attract and retain
the best available personnel for service as Outside Directors, (ii) to provide
additional incentive to the Outside Directors to serve as Directors and (iii) to
encourage their continued service on the Board.
Administration. The Director Plan is designed as an automatic grant plan
which generally does not require administration. However, if necessary, it will
be administered by a committee designated by the Board of Directors.
Eligibility. The Director Plan provides that Director Options may be
granted only to Outside Directors. Non-employee directors who were previously
employed by the Company are eligible for participation in the Director Plan. All
grants are automatic and are not subject to the discretion of any person. As of
December 31, 1997, five (5) directors were eligible to participate in the
Director Plan.
Procedure for Grants. The Director Plan provides for the grant of
nonstatutory options to Outside Directors of the Company. Each such director is
granted an option to purchase 11,250 shares of Common Stock on the date on which
such person first becomes a director, whether through election by the
stockholders of the Company or appointment by the Board of Directors to fill a
vacancy ("First Option"). Thereafter, each Outside Director will be
automatically granted an option to purchase 3,750 shares annually ("Subsequent
Option") on July 1 of each year provided that he or she has served on the Board
for at least the preceding six months.
-15-
<PAGE> 17
Terms of Options. Options granted under the Director Plan have a term of
ten (10) years. Each option is evidenced by a stock option agreement between the
Company and the director to whom such option is granted.
Exercise of Option. The First Option becomes exercisable as to
one-twelfth (1/12) of the shares subject to the option for each quarter over a
three-year period. Each Subsequent Option becomes exercisable as to one-fourth
(1/4) of the shares subject to the Subsequent Option for each quarter,
commencing one quarter after the First Option and any previously issued
Subsequent Option have become fully exercisable. An option is exercised by
giving written notice of exercise to the Company, specifying the number of full
shares of Common Stock to be purchased and tendering payment to the Company of
the purchase price. Payment for shares issued upon exercise of an option may
consist of cash, check, exchange of the Company's Common Stock or a combination
thereof.
Option Price. The option price is 100% of the fair market value of the
Company's Common Stock on the date of grant. The Board of Directors of the
Company determines such fair market value based upon the closing price of the
Common Stock on the Nasdaq National Market on the date the option is granted.
Termination of Status as a Director. If an optionee ceases to be a
director of the Company for any reason other than death or disability, vesting
of the option shall cease as of the date of termination. Thereafter, the option
may be exercised within three (3) months as to all or part of the shares that
the optionee was entitled to exercise at the date of termination. If such
termination is due to death or disability, within the meaning of Section
22(e)(3) of the Code, the optionee (or the optionee's legal representative)
shall have the right to exercise his or her option, but only within twelve (12)
months following the date of such termination, and only to the extent that the
optionee was entitled to exercise it on the date of such termination (but in no
event later than the expiration of its ten (10) year term).
Nontransferability of Options. An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
Adjustments on Changes in Capitalization. In the event any change is
made in the Company's capitalization, such as a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock or
any other increase or decrease in the number of issued shares effected without
receipt of consideration by the Company, the number of shares remaining subject
to the Director Plan and the purchase price per share shall be appropriately
adjusted.
Transfer of Control. In the event of a merger of the Company with or
into another corporation where following such merger the stockholders of the
Company own less than 50% of the voting securities of the surviving corporation
or the sale of all or substantially all of the assets of the Company, each
outstanding option shall become fully vested and exercisable, including as to
shares for which it would not otherwise be exercisable. The Board shall notify
the optionee that the option shall be fully exercisable for a period of thirty
(30) days from the date of such notice, and upon the expiration of such period
the option shall terminate. In the event of a merger with or into another
corporation where there is no change of control of the Company, each outstanding
option may be assumed or equivalent options may be substituted by the successor
corporation or a parent or subsidiary thereof.
Amendment and Termination. The Board of Directors may at any time amend
or terminate the Director Plan, provided, however, that the Plan may not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
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<PAGE> 18
the rules thereunder. The Company shall obtain shareholder approval of any Plan
amendment in the manner and to the degree required to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act or any other
applicable law or regulation. The Director Option Plan will terminate by its
terms in October 2005.
UNITED STATES TAX INFORMATION
Options granted under the Director Plan are nonstatutory options. An
optionee will not recognize any taxable income at the time the nonstatutory
option is granted. Upon exercise of the option, the optionee will generally
recognize ordinary income for federal tax purposes measured by the excess, if
any, of the fair market value of the shares over the exercise price. Because
shares held by directors might be subject to restrictions on resale under
Section 16(b) of the Exchange Act, the date of taxation may be deferred unless
the optionee files an election with the Internal Revenue Service pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
within 30 days after date of exercise.
Upon resale of the shares acquired pursuant to an option under the
Director Plan, any difference between the sales price and the exercise price, to
the extent not recognized as ordinary income as described above, will be treated
as capital gain or loss. The tax rate on net capital gain (net long-term capital
gain minus net short-term capital loss) is capped at 28%. Capital losses are
allowed in full against capital gains plus $3,000 of other income.
The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of an option under the Director Plan. The Company is not
required to withhold any amount for federal tax purposes on any such income
included by optionee.
THE FOREGOING SUMMARY OF THE EFFECT OF THE UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE OPTIONS
UNDER THE DIRECTOR PLAN DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE
MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES
NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
REQUIRED VOTE
The approval of the amendment of the Director Plan requires the
affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote on this subject matter at the
meeting. An abstention is not an affirmative vote and will therefore have the
same effect as a vote against the proposal. A broker non-vote will not be
treated as entitled to vote on this subject matter at the meeting. See
"Information Concerning Solicitation and Voting -- Quorum; Abstentions; Broker
Non-Votes."
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE AMENDMENT OF THE 1995 DIRECTOR OPTION PLAN
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<PAGE> 19
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P.,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending December 31, 1998, and recommends that stockholders vote
for ratification of such appointment. Representatives of Coopers & Lybrand
L.L.P. are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
REQUIRED VOTE
The ratification of the appointment of Coopers & Lybrand L.L.P. requires
the affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote on this matter at the meeting. An
abstention is not an affirmative vote and will therefore have the same effect as
a vote against the proposal. A broker non-vote will not be treated as entitled
to vote on this matter at the meeting. See "Information Concerning Solicitation
and Voting-Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
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<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date by (i)
each person (or group of affiliated persons) known to the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director, (iii) each of the Company's executive officers named in the Summary
Compensation Table appearing herein, and (iv) all of the Company's directors and
executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------------
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF TOTAL
- --------------- ------------------ ------------------
<S> <C> <C>
The TCW Group, Inc. 576,800 8.92%
865 South Figueroa Street
Los Angeles, CA 90017 (2)
Wellington Management Company 440,000 6.80
75 State Street
Boston, MA 02109 (2)
Milton Chang (3).................................................... 392,333 6.08
William Boeger, III (4)............................................. 299,920 4.65
David M. Buzawa (5)................................................. 279,188 4.32
Eduardo Arias (6) .................................................. 264,097 4.09
Theodore A. Boutacoff (7)........................................... 249,438 3.86
John M. Nehra (8)................................................... 136,093 2.11
James L. Donovan (9)................................................ 98,288 1.52
Donald L. Hammond (10) ............................................. 61,720 *
Robert Kamenski (11)................................................ 16,478 *
Timothy S. Powers (12).............................................. 8,769 *
Joshua Makower (13) ................................................ 2,813 *
All directors and Executive Officers as a group (11 persons) (14)... 1,809,137 28.02
</TABLE>
- ----------------------
* Represents beneficial ownership of less than 1%.
(1) Based on 6,467,287 shares issued and outstanding at April 15, 1998.
(2) Based solely on information provided pursuant to Schedules 13G filed
with the Securities and Exchange Commission for calendar year 1997.
(3) Includes 25,313 shares subject to stock options held by Mr. Chang that
are exercisable within 60 days of the Record Date.
(4) Includes 34,532 shares subject to stock options held by Mr. Boeger that
are exercisable within 60 days of the Record Date.
(5) Includes 22,188 shares subject to stock options held by Mr. Buzawa that
are exercisable within 60 days of the Record Date. Mr. Buzawa is no
longer an Executive Officer of the Company, effective February 23, 1998,
but is still an employee of the Company.
(6) Includes 230,742 shares held by the Arias Trust, dated October 19, 1994,
over which Mr. Arias exercises investment and voting control, 10,000
shares held by Mr. Arias' spouse as custodian for their daughter under
the Uniform Transfers to Minors Act, and 21,355 shares subject to stock
options held by Mr. Arias that are exercisable within 60 days of the
Record Date.
(7) Includes 20,000 shares held by Mr. Boutacoff as custodian for his
daughter under the Uniform Transfers to Minors Act and 28,438 shares
subject to stock options held by Mr. Boutacoff that are exercisable
within 60 days of the Record Date.
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<PAGE> 21
(8) Includes 27,348 shares held by Mr. Nehra's spouse, as separate property
as to which shares Mr. Nehra disclaims beneficial ownership. Also
includes 15,313 shares subject to stock options held by Mr. Nehra that
are exercisable within 60 days of the Record Date.
(9) Includes 75,475 shares held by the Donovan Trust, dated March 14, 1978,
over which Mr. Donovan exercises investment and voting control and
22,813 shares subject to stock options that are exercisable within 60
days of the Record Date.
(10) Includes 36,720 shares subject to stock options held by Mr. Hammond that
are exercisable within 60 days of the Record Date.
(11) Includes 15,625 shares subject to stock options held by Mr. Kamenski
that are exercisable within 60 days of the Record Date.
(12) Includes 8,333 shares subject to stock options held by Mr. Powers that
are exercisable within 60 days of the Record Date.
(13) Includes 2,813 shares subject to stock options held by Dr. Makower
that are exercisable within 60 days of the Record Date.
(14) Includes 233,443 shares subject to stock options that are exercisable
within 60 days of the Record Date. See footnotes (3) through (13) above.
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<PAGE> 22
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table shows, as to the Company's Chief Executive Officer and
each of its other four most highly compensated executive officers earning more
than $100,000 in salary and bonus (the "Named Officers"), information concerning
compensation awarded to, earned by or paid for their services to the Company in
all capacities during 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------------- Awards
Name and Principal Other Annual ----------- All Other
Year Salary($) Bonus($) Compensation ($) Options (#) Compensation
Position ------ ----------- ---------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Theodore A. Boutacoff 1997 $162,140 $ 15,000 -- 15,000 --
President and Chief 1996 138,400 -- -- 20,000 --
Executive Officer 1995 131,040 29,188 -- 10,000 --
Eduardo Arias 1997 165,982 -- -- 15,000 --
Senior Vice President 1996 130,940 -- 28,478(1) 10,000 --
Worldwide Sales 1995 129,872 16,290 -- 10,000 --
David M. Buzawa 1997 107,886 -- -- 5,000 --
Vice President, 1996 100,008 -- -- 10,000 --
Product Development 1995 98,906 12,975 -- 10,000 --
Robert Kamenski (2) 1997 92,461 -- -- 50,000 --
Vice President, Administration 1996 -- -- -- -- --
and Chief Financial Officer 1995 -- -- -- -- --
Timothy S. Powers (3) 1997 54,500 -- -- 50,000 $ 50,000(4)
Vice President, 1996 -- -- -- -- --
Operations 1995 -- -- -- -- --
</TABLE>
- ------------------
(1) Represents commissions paid.
(2) Mr. Kamenski joined the Company in March 1997 as Vice President, Finance
and Administration and was elected Chief Financial Officer in October
1997. His annual base salary is $138,000.
(3) Mr. Powers joined the Company in July 1997. His annual base salary is
$135,000.
(4) Represents a loan for relocation expenses which is forgiven over two
years provided Mr. Powers remains an employee of the Company during such
period.
STOCK OPTION GRANTS AND EXERCISES
The following table shows, as to the Named Officers named in the Summary
Compensation Table above, information concerning stock options granted during
the fiscal year ended December 31, 1997.
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<PAGE> 23
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------
Number of % of Total Potential Realizable Value of
Securities Options Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation for
Options Employees in Price Expiration Option Term(2)
Name Granted(#) Fiscal Year (1) ($/Sh) Date 5%($) 10%($)
- ------------------------- ----------- --------------- --------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Theodore A. Boutacoff 15,000 3.73% $5.50 4/27/07 $51,884 $131,484
Eduardo Arias 15,000 3.73% 5.50 4/27/07 51,884 131,484
David M. Buzawa 5,000 1.24% 5.50 4/27/07 17,295 43,828
Robert Kamenski 50,000 12.44% 5.75 3/11/07 180,807 458,201
Timothy S. Powers 50,000 12.44% 8.87 7/14/07 278,914 706,825
</TABLE>
(1) The Company granted options to purchase an aggregate of 267,025 shares
of Common Stock to all employees other than Executive Officers and
granted options to purchase an aggregate of 135,000 shares of Common
Stock to all Executive Officers as a group (6 persons), during fiscal
1997.
(2) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission.
Each gain is based on an arbitrarily assumed annualized rate of compound
appreciation of the market price at the date of grant of 5% and 10% from
the date the option was granted to the end of the option term. The 5%
and 10% rates of appreciation are specified by the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future Common Stock prices. The Company does
not necessarily agree that this method properly values an option. Actual
gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market conditions
and the timing of option exercises, if any.
The following table shows, as to the individuals named in the Summary
Compensation Table above, the number of options exercisable and unexercisable at
December 31, 1997, information concerning stock options exercised during the
fiscal year ended December 31, 1997 and the value of unexercised options at such
date.
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
at December 31, 1997 (#) December 31, 1997 ($)(1)
--------------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Theodore A. Boutacoff 20,209 34,791 $102,635 $69,240
Eduardo Arias 14,167 27,291 78,231 66,428
David M. Buzawa 17,709 17,291 101,697 45,178
Robert Kamenski 9,375 40,625 17,578 76,172
Timothy S. Powers 4,167 45,833 -0- -0-
</TABLE>
(1) Calculated by determining the difference between the fair market value
of the securities underlying the options at year end ($7.625 per share)
and the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has no employment contracts with any of its officers and has no
compensatory plans or arrangements that are activated upon resignation,
termination or retirement of any such officer upon a change in control of the
Company. The Director Plan provides for the accelerated vesting of all
outstanding options
-22-
<PAGE> 24
upon a change in control. In addition, because competition for talented
employees is intense, the Company may in the future consider entering into
severance agreements with certain of its key employees.
-22-
OTHER EMPLOYEE BENEFIT PLANS
401(k) Plan
The Company sponsors a 401(k) Plan under which eligible employees may
contribute, on a pre-tax basis, up to 15% of the employee's total annual income
from the Company, excluding bonuses, subject to certain IRS limitations. All
full-time employees who have attained age 18 are eligible to participate in the
plan. All contributions are allocated to the employee's individual account and,
at the employee's election, are invested in one or more investment funds
available under the plan. Contributions are fully vested and nonforfeitable.
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<PAGE> 25
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph on page 22 shall not be incorporated by reference into any
such filings.
GENERAL
The Compensation Committee (the "Committee") of the Board of Directors
establishes the overall executive compensation strategies of the Company and
approves compensation elements for the Company's Chief Executive Officer and
other executive officers. The Committee is comprised of three independent,
non-employee members of the Board of Directors, none of whom has interlocking
relationships as defined by the Securities and Exchange Commission. The
Committee has available to it such external compensation advice and data as the
Committee deems appropriate to obtain.
The compensation philosophy of the Committee is to provide a comprehensive
compensation package for each executive officer that is competitive with those
offered by companies of similar type and size, in the same geographical area and
whose executives perform similar skills to those performed by the executives of
the Company. Accordingly, the Committee follows a compensation strategy which
has used vesting terms to incentivize and reward executives as the Company
addresses the challenges associated with growth. As the Committee applies this
compensation philosophy in determining appropriate executive compensation levels
and other compensation factors, the Committee reaches its decisions with a view
towards the Company's overall financial performance. The Committee strives to
structure each officer's overall compensation package to enable the Company to
attract, retain and reward personnel who contribute to the success of the
Company.
EXECUTIVE OFFICER COMPENSATION
The objectives of the executive officer compensation program are to
attract, retain motivate and reward key personnel who possess necessary
leadership and management skills through competitive base salary, annual cash
bonus incentives, long-term incentive compensation in the form of stock options,
and various benefits generally available to employees of the Company.
Base Salary. Base salary levels for the Company's executive officers are
generally targeted to be competitive with companies in the same stage of
development and in the same industry and geographic area. In determining
salaries, the Committee also takes into account the Chief Executive Officer's
recommendations, individual experience, contributions to corporate goals and the
Company's performance.
Incentive Bonuses. The Committee believes that a cash incentive bonus plan
can serve to motivate the Company's executive officers and management to address
annual performance goals, using more immediate measures for performance than
those reflected in the appreciation in value of stock options. In 1997, the
Company's goals were targeted toward longer-term objectives for corporate
development. As a consequence, the Company did not have an incentive bonus plan
for executive officers for fiscal 1997, although certain bonus payments were
made to sales executives. The Company expects to establish an incentive bonus
plan for fiscal 1998.
Stock Option Grants. Stock options are granted to executive officers and
other employees under the Company's Option Plans. Stock option grants are
intended to focus the recipient on the Company's long-term
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<PAGE> 26
performance to improve stockholder value and to retain the services of executive
officers in a competitive job market by providing significant long-term earning
potential. To this end, stock options generally vest over a four-year period,
based on continued employment. Factors considered in granting stock options to
executive officers of the Company are the duties and responsibilities of each
individual, such individual's contributions to the success of the Company and
other relevant factors. The Company views stock options as an important
component of long-term compensation for executive officers since options motive
executive officers to manage the Company in a manner that is consistent with the
interests of stockholders.
CEO COMPENSATION
Compensation for the Chief Executive Officer is consistent with the
philosophies and practices described above for executive officers in general.
Mr. Boutacoff's salary was nominally increased in 1997 and a bonus of $15,000
was paid to him. Mr. Boutacoff was granted an option to purchase 15,000 shares
in 1997 as a form of long-term compensation.
COMPENSATION COMMITTEE
William Boeger, III
Milton Chang
Donald L. Hammond
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<PAGE> 27
COMPANY STOCK PRICE PERFORMANCE
The following graph demonstrates a comparison of cumulative total
stockholder returns, calculated on a dividend reinvestment basis and based upon
an initial investment of $100 in the Company's Common Stock as compared with the
Russell 2000 Index and the Standard and Poors 500 Index. No dividends have been
declared or paid on the Company's Common Stock during such period. The stock
price performance shown on the graph below is not necessarily indicative of
future price performance. The Company's Common Stock began trading on the Nasdaq
National Market on February 15, 1996. The graph reflects the Company's stock
price performance from the initial public offering through the end of fiscal
1997.
[IRIDEX CORPORATION PERFORMANCE GRAPH ]
<TABLE>
<CAPTION>
2/16/96 3/29/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/31/97 12/31/97
------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IRIDEX Corporation 100.000 113.889 166.667 91.667 83.333 75.000 101.389 131.944 84.722
Standard & Poors 500 100.000 99.617 103.495 106.073 114.315 116.843 136.600 146.190 149.762
Russell 2000 100.000 102.855 107.780 107.712 112.755 106.521 123.256 141.118 135.897
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 30, 1998
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<PAGE> 28
IRIDEX CORPORATION
1998 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means IRIDEX Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity and any
person designated as a key medical advisor by the Company.
<PAGE> 29
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
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<PAGE> 30
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1998 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
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<PAGE> 31
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
-4-
<PAGE> 32
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii)to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be
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<PAGE> 33
withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may deem necessary
or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator; and
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 150,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 100,000
Shares which shall not count against the limit set forth in subsection (i)
above.
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<PAGE> 34
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that (i) in the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such shorter term as
may be provided in the Option Agreement and (ii) in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
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<PAGE> 35
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii)such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
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<PAGE> 36
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for thirty (30) days following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later
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<PAGE> 37
than the expiration of the term of such Option as set forth in the Notice of
Grant), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death. In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Issuance of Shares. After payment, the Shares purchased shall be
duly issued; provided, however, that the Administrator may require that the
purchaser make adequate provision for any federal and state withholding
obligations of the Company as a condition to the purchaser purchasing such
Shares.
(c) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
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<PAGE> 38
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time
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<PAGE> 39
and in the manner contemplated. To the extent it has not been previously
exercised, an Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation or a Parent or Subsidiary of the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
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<PAGE> 40
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE> 41
IRIDEX CORPORATION
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
1/8th the Shares subject to the Option shall vest six months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates.
<PAGE> 42
Termination Period:
This Option may be exercised for [three months] after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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<PAGE> 43
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, AND (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares;
or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If
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<PAGE> 44
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the
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<PAGE> 45
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: IRIDEX CORPORATION
- --------------------------------- ---------------------------------------
Signature By
- --------------------------------- --------------------------------------
Print Name Title
- ---------------------------------
Residence Address
- ---------------------------------
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<PAGE> 46
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
------------------------------------
Spouse of Optionee
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<PAGE> 47
EXHIBIT A
IRIDEX CORPORATION 1998 STOCK PLAN
EXERCISE NOTICE
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of IRIDEX Corporation (the "Company") under
and pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option Agreement
dated , 19___ (the "Option Agreement"). The purchase price for the
Shares shall be $ , as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
<PAGE> 48
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: IRIDEX CORPORATION
- --------------------------------- -------------------------------------
Signature By
- --------------------------------- -------------------------------------
Print Name Its
Address: Address:
- --------------------------------- IRIDEX Corporation
1212 Terra Bella
- --------------------------------- Mountain View, CA 94043
-------------------------------------
Date Received
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<PAGE> 49
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between IRIDEX
Corporation, a Delaware corporation ("Pledgee"), and _________________________
("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1998 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant
to the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number
______, duly endorsed in blank or with executed stock powers, and herewith
delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who
shall hold said certificate subject to the terms and conditions of this Security
Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledge holder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is now
or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within
<PAGE> 50
the meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here under upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
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<PAGE> 51
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" ---------------------------------
Signature
---------------------------------
Print Name
Address: ---------------------------------
---------------------------------
"PLEDGEE" IRIDEX Corporation,
a Delaware corporation
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Title
"PLEDGEHOLDER" --------------------------------
Secretary of
IRIDEX Corporation
-4-
<PAGE> 53
EXHIBIT C
NOTE
$_______________ Mountain View, California
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to IRIDEX
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
------------------------------------
------------------------------------
<PAGE> 54
1998 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative
below, you and the Company agree that this Stock Purchase Right is granted under
and governed by the terms and conditions of the 1998 Stock Plan and the
Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of
which are made a part of this document. You further agree to execute the
attached Restricted Stock Purchase Agreement as a condition to purchasing any
shares under this Stock Purchase Right.
GRANTEE: IRIDEX CORPORATION
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
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<PAGE> 55
EXHIBIT A-1
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is
an Service Provider, and the Purchaser's continued participation is considered
by the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Admin istrator has granted to the Purchaser a
Stock Purchase Right subject to the terms and conditions of the Plan and the
Notice of Grant, which are incorporated herein by reference, and pursuant to
this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for any
or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all
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<PAGE> 56
rights and interests therein or relating thereto, and the Company shall have the
right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares to
be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [one year] after the Date of Grant
and __________________ percent (______%) of the Shares [at the end of each month
thereafter], provided that the Purchaser does not cease to be a Service Provider
prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6
or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the provi
sions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
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<PAGE> 57
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contem-
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<PAGE> 58
plated by this Agreement. The Purchaser is relying solely on such advisors and
not on any statements or representations of the Company or any of its agents.
The Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
the transactions contemplated by this Agreement. The Purchaser understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes
as ordinary income the difference between the purchase price for the Shares and
the Fair Market Value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" includes the right of the Company
to buy back the Shares pursuant to the Repurchase Option. The Purchaser
understands that the Purchaser may elect to be taxed at the time the Shares are
purchased rather than when and as the Repurchase Option expires by filing an
election under Section 83(b) of the Code with the IRS within 30 days from the
date of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of California. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
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<PAGE> 59
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED: _____________________
PURCHASER: IRIDEX CORPORATION
- ------------------------------ ----------------------------------
Signature By
- ------------------------------ ----------------------------------
Print Name Title
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<PAGE> 60
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto (__________) shares of the Common Stock of IRIDEX Corporation
standing in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, 19__.
Dated: _______________, 19
Signature:_____________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 61
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
______________, 19__
Corporate Secretary
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
Dear _________________:
As Escrow Agent for both IRIDEX Corporation, a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 62
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 63
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
PURCHASER: _____________________________
_____________________________
_____________________________
ESCROW AGENT: Corporate Secretary
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
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<PAGE> 64
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of California.
Very truly yours,
IRIDEX CORPORATION
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
-------------------------------------
Corporate Secretary
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<PAGE> 65
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of IRIDEX Corporation, as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: _______________, 19
------------------------------------
Signature of Spouse
<PAGE> 66
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: shares (the "Shares") of the Common Stock of IRIDEX Corporation
(the "Company").
3. The date on which the property was transferred is: __________ __, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is:
$---------------.
6. The amount (if any) paid for such property is:
$---------------.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________, 19____ ___________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ___________________________________________
Spouse of Taxpayer
<PAGE> 67
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
IRIDEX CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 1998
The undersigned stockholder of IRIDEX Corporation, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, and hereby appoints Theodore A. Boutacoff and Robert Kamenski,
or either of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 1998 Annual Meeting of Stockholders of IRIDEX Corporation to
be held on June 8, 1998, at 2:00 p.m., Pacific daylight savings time, at the
principal offices of the Company located at 1212 Terra Bella Avenue, Mountain
View, California 94043, and at any adjournment(s) thereof and to vote all shares
of Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
__ FOR all nominees listed below (except as indicated).
__ WITHHOLD authority to vote for all nominees listed below.
Theodore A. Boutacoff James L. Donovan
Donald L. Hammond William Boeger, III
Milton Chang Joshua Makower
John M. Nehra
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST
ABOVE.
2. PROPOSAL TO APPROVE THE ADOPTION OF THE 1998 STOCK PLAN:
__ FOR __ AGAINST __ ABSTAIN
3. PROPOSAL TO APPROVE THE AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE
PLAN:
__ FOR __ AGAINST __ ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDMENT OF THE 1995 DIRECTOR OPTION PLAN:
__ FOR __ AGAINST __ ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS.
__ FOR __ AGAINST __ ABSTAIN
and, in their discretion, upon such other matter or matters which may properly
come before the meeting and any adjournment(s) thereof.
<PAGE> 68
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR APPROVAL OF THE
ADOPTION OF THE 1998 STOCK PLAN, FOR APPROVAL OF THE AMENDMENT OF THE 1995
EMPLOYEE STOCK PURCHASE PLAN, FOR APPROVAL OF THE AMENDMENT OF THE 1995 DIRECTOR
OPTION PLAN, FOR RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT
ACCOUNTANTS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
Dated: ________________ , 1998
--------------------------------------------
Signature
--------------------------------------------
Signature
(THIS PROXY SHOULD BE MARKED, DATED, SIGNED
BY THE STOCKHOLDER(S) EXACTLY AS HIS OR HER
NAME APPEARS HEREON, AND RETURNED PROMPTLY
IN THE ENCLOSED ENVELOPE. PERSONS SIGNING IN
A FIDUCIARY CAPACITY SHOULD SO INDICATE. IF
SHARES ARE HELD BY JOINT TENANTS OR AS
COMMUNITY PROPERTY, BOTH SHOULD SIGN.)
